Asset finance: hire purchase, leasing and refinancing for UK businesses

• General equipment such as tools, IT, catering or medical kit: equipment finance.
• Production and plant such as CNC machines, presses, production lines and heavy plant: machinery finance.
• Cars, vans and fleets: van finance, electric car business finance, or our guide to business vehicle finance.
• Software, IT systems and fit-outs with little resale value: soft asset finance.
• Buying an asset to own over time: business hire purchase; or, if you want use without ownership, a finance lease.
• Cash from assets you already own: asset refinance.
• A weaker credit history: our guide to bad credit asset finance.

Hard assets are tangible items with a resale value, such as vehicles, machinery, plant and agricultural equipment. They are the most straightforward to finance because the lender can recover value if needed.

Soft assets have little resale value, such as software, IT systems, security equipment, fixtures and fittings. They can still be financed, but lenders look more closely at the strength of your business because the asset offers less security.

• Construction: excavators, telehandlers, dumpers and vans, so larger jobs do not drain cash needed for materials and wages.
• Agriculture: tractors, combines and handlers, sometimes with repayments matched to harvest income.
• Manufacturing and engineering: CNC machines, robotics and production lines that last many years.
• Transport and logistics: HGVs, trailers, vans and forklifts, often grouped into one facility with planned replacement cycles.
• Healthcare: dental chairs, imaging and diagnostic equipment for practices.
• Hospitality and retail: commercial kitchens, refrigeration, coffee machines, EPOS and fit-outs.

Limited companies, partnerships and sole traders can all apply, although sole traders may find fewer lenders and may need a strong personal credit record. Finance of £25,000 or less to sole traders and small partnerships can be regulated consumer credit.

The asset you are financing is normally the main security, so most asset finance needs no property charge. With hire purchase the lender owns the asset until the final payment; with a lease it stays in the lender's ownership throughout, which is why it can repossess if payments stop.

Lenders often ask limited company directors for a personal guarantee, particularly where the business is young, the asset is soft or specialist, or the amount is large relative to turnover. A bigger deposit, a shorter term or a strong trading record can reduce or remove that requirement. For larger facilities a lender may also want a debenture. Read our guide to personal guarantees before you sign one.

The main alternatives are a general business loan, a wider asset-based facility or simply paying cash. An unsecured business loan can fund kit and installation together, but lenders price it on the business rather than the asset. Asset-based lending combines plant, stock and receivables into one revolving facility, which suits larger businesses with several asset classes. A secured business loan against property may offer a longer term for a big project. If cash is plentiful, buying outright avoids interest, though it ties up working capital. Our guide to hire purchase vs leasing compares the two most common agreements.

With hire purchase, your business is normally treated as owning the asset and may be able to claim capital allowances. With leasing, rental payments are often treated as a business expense. The rules are detailed, so check the right treatment with your accountant and see HMRC's guidance on capital allowances.